Europe rebound boosts hope for a strong global recovery

Buoyed by strengthening rebounds in Germany and France, the 16-nation euro zone appears to have climbed out of its worst recession since World War II, fueling hopes that a lasting global recovery is beginning to take shape.

The data released Friday -- showing modest 0.4% growth in the third quarter among the nations that use the euro, compared with a 0.2% contraction in the second quarter -- came after the United States and Japan have also apparently emerged from recession.

At the same time, the economies in China, Brazil and other emerging giants are roaring ahead. Although several countries in Europe -- most notably Britain, Spain and Ireland -- are still mired in sharp downturns, some troubled nations like Italy are beginning to post positive growth.

That has some analysts optimistic that the fragile global recovery that started several months ago may be firming up. Most, however, remain cautious, warning that the rebound in some regions -- especially Europe -- remains relatively weak, and the risk of a slip back into recession is still very much present.

Unemployment rates continue to climb worldwide, and national debt levels in many nations are at their worst levels in years.

Although government stimulus spending worldwide may have succeeded in jump-starting the global economy for now, some countries may be forced to scale down spending in 2010 because of soaring budget deficits. Several nations in Europe, for instance, are poised to start withdrawing cash-for-clunkers and employment programs that have buoyed their economies in recent months.

“Yes, any improvement in economic activity in the world is good news,” said Howard Archer, chief European economist at IHS Global Insight in London. “But the question is: Is this sustainable, especially once the stimulus measures start to be withdrawn?”

Yet the rebound in Europe, one of the regions hardest hit by the financial crisis that started in the United States, is the latest positive sign for the global economy.

The recovery in the region is being led by Germany and France, which became the first major economies to pull out of recession in the second quarter. They continued expanding in the third quarter that ended in September, with Germany posting a strong 0.7% gain and France pulling out a more modest 0.3% uptick.

The recoveries there, analysts say, appear to be stemming in large part from a rebound in exports, particularly to meet increased demand in China. In addition, some retailers in Europe appear to be restocking their shelves to make up for vastly reduced inventories.

Yet there has been little sign of a rebound in one of the key indicators economists are looking at to judge the strength of the recovery: consumer demand. In fact, consumer spending fell in Germany during the third quarter and was flat in France.

In addition, Europe’s export-led recovery, analysts say, may be in jeopardy from the weak dollar, which has made products more expensive on global markets. That, analysts say, has been one factor behind a jump in Europe’s unemployment rate to 9.7% in September, the highest level since January 1999.

“We are predicting an 8% to 10% drop in 2010 exports” as a result of the weak dollar, said Elana Olesa Munoz, spokeswoman for Miguel Torres in Barcelona, one of Europe’s largest wine exporters.

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Faiola writes for the Washington Post.